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What is Shared Ownership and How Does it Work?

Updated: Sep 17, 2023


 
A house with a tree

Shared ownership is a government-backed scheme designed to help people get onto the property ladder who might not be able to afford to buy a home outright. Under the scheme, buyers can purchase a share of a property (usually between 25% and 75%), while paying rent on the remaining share to a housing association or developer who owns the other share.


The buyer will need to secure a mortgage to purchase their share of the property and will be responsible for paying their mortgage as well as a monthly rent to the housing association or developer. As the buyer's income and savings increase, they can gradually buy more shares in the property, a process known as staircasing, until they own the property outright.



The Benefits and Drawbacks of Shared Ownership


Shared ownership can be an attractive option for many first-time buyers who may not be able to afford to buy a property outright. The scheme allows buyers to get on the property ladder with a smaller deposit than would be required for a traditional mortgage, and the monthly payments (which include both mortgage and rent) are often lower than renting a similar property.


However, there are also some drawbacks to shared ownership. For example, buyers may find it difficult to sell their share of the property, as the housing association or developer has the right of first refusal to buy it back. In addition, buyers may find that the monthly payments can increase significantly if the rent or mortgage rates rise.



How to Apply for Shared Ownership


Applying for shared ownership is a relatively straightforward process. Buyers will need to find a property that is part of the shared ownership scheme and check that they meet the eligibility criteria. This typically includes having a certain level of income and savings, as well as not already owning a property.


Once a suitable property has been found, buyers will need to apply to the housing association or developer who owns the other share of the property. The application will typically involve filling out a form and providing proof of income and savings. If the application is successful, the buyer will be able to purchase their share of the property and start paying their mortgage and rent.



Is Shared Ownership Right for You?


Whether shared ownership is the right option for you will depend on your individual circumstances. If you are a first-time buyer with limited savings, shared ownership may be a good way to get onto the property ladder. However, if you have enough savings for a traditional mortgage, you may want to consider buying a property outright.


It is also important to consider the long-term costs and implications of shared ownership, such as the potential difficulties in selling your share of the property, as well as the possibility of increasing monthly payments.



Summary


Shared ownership can be an excellent way for first-time buyers to get onto the property ladder, but it is important to understand how it works and its benefits and drawbacks before making a decision. If you think shared ownership might be right for you, start by researching the properties available in your area and check your eligibility. With careful planning and consideration, shared ownership could be the key to owning your dream home.



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